Third Party Billing
Third-party billing is a form of billing in which an intermediary or third-party provider, such as a payment service provider, handles the billing and payment between a customer and the company.
What is third-party billing?
Third-party billing is a form of billing in which an intermediary or third party provider, such as a payment service provider, handles the billing and payment between a customer and the company, also called sub acquiring. This is a simplified billing process that allows a company to bill an outside organization for its services or products. The service offered depends on the complexity of the billing and the size of the company. Third-party billing is particularly interesting for smaller companies and online businesses, as they can offer credit cards as a payment method, for example, but do not need to have the technical infrastructure themselves, including PCI certification.
The advantages for the company
There are a number of advantages for the offering company. One of them is the option to outsource the entire payment processing. This can mean significant cost savings in human resources and internal technical infrastructure, as well as greater security and protection of payment methods for buyers of services and products.
At the same time, this makes the company more attractive to the customer, as it provides more payment methods. This increases the likelihood of a purchase being concluded and customer satisfaction.
In addition to invoicing, payment service providers offer the receipt of payments, a possible request for payment – possibly via a collection procedure, also collection in the event of late payment and the technical options for integrating payment methods into an online store. In general, a different solution package is offered for each company based on its complexity and need.
Other benefits include reducing the cost and effort of businesses, as typically the terms for businesses offering the service of payment service providers are better than if the entire infrastructure was in place at your business.
Especially for recurring, regular debits, such as those common in the subscription business, third-party billing is a smart and easy-to-implement billing method. Instead of investing in a technical infrastructure, the company simply pays transaction fees, sometimes a flat monthly fee.
The advantages for customers
The main advantage for the buyer of services and products is the security in the payment process. The service providers offering Third-party billing services have the necessary experience in terms of security, but also for the convenience of the customer, giving more reliability and trustworthiness to the company offering the services and products. This is a great option especially for small businesses that do not yet have a proper infrastructure for payment transactions.
Examples for the application of Third-party billing
Common examples of the use of third-party billing can be found today, especially in the online and subscription sectors. Often, for the reasons mentioned above, no own payment interfaces are offered, but frequently those of third-party providers.
A very simple and easy to understand example comes from the insurance industry. Insurance brokers are third party agents who market products and services to the buyers of those insurance policies. The customer goes through the broker to secure a good insurance policy with reasonable rates and terms, while the insurance company works through the broker to attract a new customer. If the broker succeeds in bringing a new customer to an insurer, the broker receives a commission from the insurer.
Thus, the principle of third-party billing is by no means new to business and yet revolutionary, especially for online commerce and for recurring payments in the subscription business.
Conclusion: Third-party billing as security for companies and customers
As technology continues to evolve and change the way transactions and interactions are handled in the digital age, more and more people and businesses are turning to third-party billing.
Through the payment service provider, a buyer can make a payment for the purchase of a good or service. The third-party provider receives the payment from the buyer, checks whether the funds are available, and debits the buyer’s account. The money is then eventually transferred to the company’s account.
In particular, small and young companies benefit from a so-called sub-acquirer, as they have the opportunity to offer a secure payment method despite a low level of awareness and few ratings. At the same time, the merchant saves a large part of the fixed costs by processing through the third-party provider and usually only pays when a transaction has taken place.
